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The bitcoin bubble exploded. In early 2017, a cryptocurrency unit (we will explain later) was worth $ 800. A year ago it peaked at almost $ 20,000. And this week fell below $ 4000 for the first time in two years. So the bitcoin increased by 2,500% and then fell over 80%.
The explosion of the price 60 times in three years overshadows the infamous technology bubble of the end of the years & # 90; This resulted in a simple increase of four times in three years. The rise and fall of Bitcoin represent the most rapid boom to bust cycle in the history of investment, eclipsing even the tulip mania in the seventeenth century Holland.
Holland was the richest country in the world and its favorite flower, tulips, was a big deal. New and interesting varieties were today like technological start-ups. Investors would pour money into them in the hope of making big profits.
But everyone was taken away with the apparent potential to make pots of money. The price of individual tulip bulbs has risen to tens of thousands in today's money. And then … it crashed. People realized that they were just flower bulbs.
Bitcoin also does not have much intrinsic value. It is only a computer generated number, a transaction confirmed by cryptography, that is to say the fantasy of mathematics. I do not pretend to fully understand it. And you can be damn sure that many of the people who invested us did not do it too.
Include boxers Mike Tyson and Floyd Mayweather who have renamed themselves "Crypto & # 39; Mayweather shortly before fighting Conor McGregor in 2017. Ex-football manager Harry Redknapp – an illiterate technology who once said he never sent a text message – also tweeted to his 200,000 followers that he was "pretty excited "for Bitcoin investments.
Get the picture. When these guys are so publicly investing in something, it's time to go out. And the shame on them for using their social media to raise the price of something misunderstanding on which they have just invested. The purchase of bitcoins, like the purchase of an apartment in Dubai, was a sign that you had too much money.
On the other side of the (Bit) currency, many investment experts such as Warren Buffet have nicknamed him "poison rat mice". Our title selector, Rory Gillen of Gillen Markets, described the fundamental flaw of bitcoin in an interview on these pages long before the bubble burst. He said that the bitcoin could be used as a currency, which would give it value. But if it is used as a currency, a huge amount of bitcoins should be issued. And once this occurs, it will no longer have any rarity that drives current assessments.
Bitcoin is worth something for criminals and tax evaders. Email scammers and blackmailers require to be paid in bitcoins because it is not traceable. Me and millions of others have received ransomware threats from bad scammers asking for bitcoin payment. Their nefarious business would never have worked for real money.
Probably the Bitcoin should be banned. And it is in 10 countries up to now, including China and Russia. Taiwan banned him after a bad kidnapping incident in which a billionaire was defeated and millions were requested in Bitcoin.
Other countries are expected to follow the example to discourage crime and tax evasion. How can Revenue track what we earn if it is hidden in a non-negotiable currency?
The tendencies of Bitcoin and tulip adapt to the definition of Investopedia of an investment bubble: their prices were not consistent with any rational estimate of their real value. But what about other potential bubbles – actions, houses and even global debt? Here's what's in store – and what you should do about it.
housing
House price increases have slowed. But the houses are very different from tulip bulbs, bitcoins or even shares. They are very real goods we need to live that are scarce and much cheaper to buy than to rent.
Prices may seem expensive now compared to the bottom of the market. But that was a ridiculously low base. Even now, prices are just above the cost of building a new home in Dublin and much lower than those in most of the country. Does this make current house prices inaccurate, irrational or emotional, as the classic definition of a bubble would require?
The economist Alan McQuaid of Merrion Capital does not think so. "As we wait for more homes to be built, residential property prices will continue to rise, although anecdotal evidence suggests that house price growth may have started to decline, especially in Dublin.
"However, overall housing price growth (single figure) is expected to remain in positive territory on an annual basis for the immediate future, but the biggest increase in 2018 and 2019 should come from outside the capital. , with the price required for homes in more expensive areas that increase at a slower pace. "
What to do
Buy a home if you need a place to live. But bubble-proof shopping around for the best mortgage deal, whether you're buying or changing as an existing borrower. A mortgage broker can help guide you through the minefield. You can also consult the best rates on bonkers.ie and ccpc.ie.
Debt
The world is in the middle of a global debt bubble right now that could explode in the face. The level of global indebtedness increased from $ 84 tn in 2000 to $ 173 tn during the 2008 financial crisis, when it caused an accident.
But since then it has almost tripled to $ 250 tn (one trillion = one million million). The unfortunates believe that this mountain of debt is reversed and will cause another financial crisis worse than the last. However, most analysts think that while a crisis could hit, it will not be so bad.
What to do
If the debt bubble breaks out or not, pay to reduce your debt. Start with the most expensive debt (credit cards) and make your way to the cheapest (mortgages). With rising rates, it is also time to fix the mortgage. Again see bonkers.ie and ccpc.ie.
actions
Investors are nervous. More than € 60 billion has been wiped out by the value of major UK companies this month, and the UK markets have been on course for the worst December since 2002.
Wall Street sales were even more brutal, with the Dow Jones Industrial Average declining by more than 10% this month, kicking off the worst December since 1931 during the Great Depression.
Some investors argue that the latest price decline could present a purchase opportunity once it is over. Others believe that it may be the beginning of an important correction.
The problem for investors is that it is almost impossible to choose when to leave the market and the time to return is even more difficult. Investors have lost more money by not investing them than they have had in accidents. Losses usually run out in the long run.
"Equities and equities have always been a benchmark for traditional investors," says Paul Merriman of Pax Financial Planning and askpaul.ie.
"Although I think we are coming to the end of a bull market, the stock market continues to outperform most other long-term asset classes when we look at historical returns." Investors still need to be aware that a & # 39; high exposure to equities can generate negative returns, which reached -35% in 2008. Despite an anomaly, it is important to understand the potential negative aspects, as well as the possible rise in this type of investment ".
This year was definitely a mini-bubble that involved the so-called FAANG titles – Facebook, Apple, Amazon, Netflix and Google. While technology giants may have been among the largest contributors to US equity markets in the last decade, with huge returns for savers, their star status has slipped while their combined value has dropped more than $ 1 tn from maximum levels reached previously.
"FAANG securities have experienced a particularly difficult period, with more general concerns about global growth, trade rates between the United States and China and particular idiosyncratic risks of companies that affect their share prices," said Gerald Fitzgerald, analyst at Invesco in Dublin.
"For example, Facebook has seen its share price fall due to concerns over the use of personal data by the company, while Apple has seen lower earnings forecasts that lower the price of shares."
It is agreed that the recent FAANG mania has been in line with one of the definitions of a bubble: the excitement. Investors dived because of a pack instinct.
What to do
Beat the hatches. Now it's not a good time to invest a lot of money in stocks.
But do not delay the start of a savings or normal pension plan. Making small contributions in the beginning will not risk much money. You can then beat them when the worst is over and you will be well placed to cash in for recovery.
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